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Archive for January, 2010

If you haven’t heard about the Defense Advanced Research Projects Agency (DARPA), they’re the ones who reallyinvented the Internet. An interesting new book just came out on DARPA by Wired contributor Michael Belfiore that got me thinking. These people have been practicing open innovation since the 50’s!

Established in 1958, DARPA’s original mission was “to prevent technological surprise . . . but also to create technological surprise for our enemies.” DARPA is charged with technical demonstration of the possible so that military leaders can direct development initiatives to meet specific challenges with emerging technology.

DARPA does all this with an annual budget that is currently around $3 billion. Compare that to the over $515 billion total DoD budget or the $16 billion budget of NASA (and all they’ve done is fly to the moon). DARPA has accomplished such an amazing ROI by applying the principals and practices that we contemporaneously refer to as open innovation. (OK, so I’m being hyperbolic. NASA has done more than just fly to the moon and DARPA never directly monetizes its technologies to realize any kind of return.)

This is a powerful testament of the efficacy of open innovation. DARPA wasn’t conceived of as the exemplar of open innovation from the start but rather it evolved and adapted to get to this point. Nonetheless, in a 2008 statement prepared for the House Armed Services Committee, former DARPA director Tony Tether explained what he believed was behind DARPA’s success (I’ve reorganized and grouped Tether’s statement here while trying to preserve the actual wording, adding my comments in italics):

Small and flexible: DARPA has only about 140 technical professionals; DARPA presents itself as “100 geniuses connected by a travel agent.”

Open innovation actually seems to imply the larger the crowd, the more ideas and greater potential for innovation, and I would argue that is actually how DARPA works. The core group of program managers is “small and flexible,” but they act as the hub in a much larger network of researchers, as we’ll see below. Keeping the core group small contributes to DARPA’s success by promoting familiarity and reducing burdensome complexity in the organization. There is evidence suggesting humans evolved to function best in groups of less than 150.

Flat organization: DARPA avoids hierarchy, essentially operating at only two management levels to ensure the free and rapid flow of information and ideas, and rapid decision-making.

Autonomy and freedom from bureaucratic impediments: DARPA has an exemption from Title V civilian personnel specifications, which provides for a direct hiring authority to hire talent with the expediency not allowed by the standard civil service process.

Admittedly, I’m taking some liberties here with the connection to open innovation. Strictly speaking, open innovation is more about organizational permeability than a particular organizational structure, but the two are related. The flat hierarchy, autonomy and freedom from bureaucracy described here allow for good ideas to bubble up on their own merits, enabling the best ideas to diffuse inside and outside of the organization. This is the same organizational structure behind the open source movement.

Eclectic, world-class technical staff and performers: DARPA seeks great talent and ideas from industry, universities, government laboratories, and individuals, mixing disciplines and theoretical and experimental strengths. DARPA neither owns nor operates any laboratories or facilities, and the overwhelming majority of the research it sponsors is done in industry and universities. Very little of DARPA’s research is performed at government labs.

Teams and networks: At its very best, DARPA creates and sustains great teams of researchers from different disciplines that collaborate and share in the teams’ advances.

Mix of connected collaborators: DARPA typically builds strong teams and networks of collaborators, bringing in a range of technical expertise and applicable disciplines, and involving university researchers and technology firms that are often not significant defense contractors or beltway consultants.

Hiring continuity and change: DARPA’s technical staff is hired or assigned for four to six years. Like any strong organization, DARPA mixes experience and change. It retains a base of experienced experts – its Office Directors and support staff – who are knowledgeable about DoD. The staff is rotated to ensure fresh thinking and perspectives, and to have room to bring technical staff from new areas into DARPA. It also allows the program managers to be bold and not fear failure.

These four points all speak to the value of diversity in innovation. Open innovation works so well, in part, because it sources from a large, diverse pool of ideas (meaning both inventions and their potential applications). As I posited in another post, fresh perspectives can shed light on overlooked solutions or even turn a failure into a success. The practice of 4-6 year assignments might at first seem like an impediment when breakthroughs in basic research can take much longer than that, but I think that hindrance is outweighed by the benefits of a fresh set of eyes and the sense of urgency that a finite assignment imparts.

Project-based assignments organized around a challenge model: DARPA organizes a significant part of its portfolio around specific technology challenges. It foresees new innovation-based capabilities and then works back to the fundamental breakthroughs required to make them possible. Although individual projects typically last three to five years, major technological challenges may be addressed over longer time periods, ensuring patient investment on a series of focused steps and keeping teams together for ongoing collaboration. Continued funding for DARPA projects is based on passing specific milestones, sometimes called “go/no-go’s.”

Outstanding program managers: The best DARPA program managers have always been freewheeling zealots in pursuit of their goals. The Director’s most important task is to recruit and hire very creative people with big ideas, and empower them.

If open innovation is a strategy, these two points are about tactical execution. PMO best practices can offer a lot of value in the open innovation context because they’re all about getting disparate groups to collaborate effectively. Still, there is more to innovation than program management. Effective execution of an open innovation strategy needs to include an explicit framework for evaluating intellectual property (in a more expansive sense of the term than just the legalistic one). Which ideas are core and which are periphery? Which are strategic?

Interestingly, DARPA should be as well versed in managing IP as anybody. They aren’t protecting just trade secrets. They’re protecting national security secrets, and yet they’ve found a way to balance the trade offs of openness and secrecy. If only Tether had spoken more on that point. Program management is a great point of departure for implementing open innovation, but more is needed. What do you think are the other frameworks and methodologies relevant to open innovation?

Outsourced support personnel: DARPA extensively leverages technical, contracting, and administrative services from other DoD agencies and branches of the military. This provides DARPA the flexibility to get into and out of an area without the burden of sustaining staff, while building cooperative alliances with its “agents.” These outside agents help create a constituency in their respective organizations for adopting the technology.

When you license a technology that doesn’t fit with your current business model to another company or spin off a unit to develop a business around a new technology, this is effectively what you are doing. Outsourcing, insourcing, whatever. Reducing overhead may not sound sexy, but “the flexibility to get into and out of an area without the burden of sustaining staff, while building cooperative alliances” is precisely what open innovation does.

Acceptance of failure: DARPA pursues breakthrough opportunities and is very tolerant of technical failure if the payoff from success will be great enough.

Not unique to open innovation, risk taking is critical to all innovation. Fail, learn, try again. Fail fast and often so that you can succeed sooner. These are Silicon Valley mantras. If you have an idea that doesn’t fit with your business model, don’t shelve it. Try to find another way to monetize it – through licensing or a spin off. Have an intractable problem your organization can’t seem to solve? Don’t despair! Look outside your organization, as far and wide as possible, and offer incentives for others to solve it for you.

Tether made one final another point relevant to open innovation, about connecting research to development to solve specific challenge, but discussion of that point is deserving of its own post.